It sure looks as if the real estate market in South Africa is moving more toward a buyer's market at present. So, buyers should be ready to make the most of what could be a fleeting opportunity to purchase South African real estate.
Just how much the real estate market will slow down is up for debate, but economic factors converging on the national real estate market could be turning against sellers and give buyers the upper hand (if only for a short time).
If the widely reported slow-down of house sales is any indication, a correction could be in the works.
To prepare for the possibility of the property market swinging into their favor, potential buyers should take note of the following strategies for shopping property in a transitional market:
- Do your homework. Don't leap before you look. Learn about the home buying process and the real estate market in your area. Information is power and getting informed about all the facts beforehand can give buyers an edge.
- Study the local property market trends. Real estate markets are local. The Port Elizabeth real estate market might, for instance, have become a buyer's market, but that might not be the case in other areas of South Africa. Buyer's markets tend to include high sale inventories, slow price increases, flat or falling prices and more sellers than buyers. A seller's market doesn't become a buyer's market over night, though. So, if you aren't tracking market indicators during the transition period it could cost you dearly.
- Compare rentals to monthly bond repayments. If the two numbers are close, the risk of buying (losing the property through default) is low.
- Get your money in order. Motivated sellers want to see the money, and they want to see it quick! Even highly motivated sellers don't want to wait for your money to show up.
- Don't pay too much. Paying seller's asking prices, instead of market related prices, in a transitional market is a mistake many buyers make. If needs be, hire a professional appraiser to determine the market value. One thing you do not want to do, is waste a golden opportunity with guessing the property values.
- Don't low ball property sellers. Know what the market values are and don't offer too little and ask for too many concessions. Even in a buyer's market, that could insult the seller.
- Buy because you want the property, not just because it's a buyer's market. If you are not absolutely sure that you need and want to buy a property, it might be wiser to stay out of the market until a clearer market direction is established. Waiting a while, before purchasing a property, might be somewhat of a gamble in a transitional market, but it could pay off for buyers who are not ready to commit, yet.
Buying Property in a Transitional Market
A transisional market, by definition, means that there is no clear indication what direction the real estate market will take. Should this prove to be just the turning point of the up-market, it could take years for prices to return to current levels. A property purchaser would need even higher prices, just to cover the transaction costs of buying and selling the property, should he/she decide to exit. Buyers generally need at least 15 percent appreciation to recoup those costs.
